Tuesday, April 8, 2008

So. . . How Much??

So, what is the imminent USGS Bakken study going to come up with? Supposedly, it pertains to projected recoverable oil from MT, ND and Canada (since when did the USGS start estimating what's in Canada?), and not to the amount of oil generated or in place.

There must be at least one savant out there that can predict this to within 10-15 million bbls, not? Unless someone wants to donate some mineral rights, I don't see there being any prize to the winner, except knowing that you probably should have instead picked some lottery numbers.(I don't see this contest going anywhere for some reason.)

I don't think we'll let Mr. Steece from SD play, as he isn't quite sure where the Bakken extends. (Hint: look at some logs of some wells in SD and see if you can find it -- you won't). The part that really cracks me up is the "not fully convinced" and "it would not be wise" parts.

From the 4/8 Sioux Falls Argus Leader:

Fred Steece, oil and gas supervisor for the state Department of Environment and Natural Resources, said its not clear how much of the formation reaches South Dakota and whether the parts that do contain recoverable oil reserves. “Geologically, were not fully convinced that the productive zone of the Bakken extends into South Dakota,” Steece said.

“Otherwise, Im sure there would be people in here. There would be leasing and test drilling.” Its possible South Dakota could benefit from a Bakken boom, Steece said, adding that it would not be wise to start planning on bountiful production estimates based on expansive reserves that could be difficult to extract.

24 comments:

So much of US on-shore oil activity has been based on the following. mostly incorrect premises1. the world is running out of oil

2. There is little economic oil yet to be found (oil that can be found and produced for less than the world market price)in the continental US (aka Lower 48) without going off-shore

3. Producing oil anywhere in the US but particularly in Alaska will tear up the environment

4. Foreign oil is problematic as its mostly found in countries where there are terrorists or communist leaders seeking to nationalize the supply

5. The combination of wind, ethanol from corn and solar power will magically solve our enery problems and we need no longer drill for oil in the US.

The problem is, most of this is not right. The new wells in the Bakken on a cost per bbl basis may represent some of the cheapest oil on the planet right now. If driller/operators can find and produce this oil for anything under $50 a bbl there will be tons of interest (EOG's direct drilling cost is claimed to be $22 a bbl). It's amazing to me that given an option like this ethanol as a fuel is unfathonably stupid and while I can buy an E-85 Chevy, I'm still waiting to see the first wind- or solar- powered car offered by GM dealerships.

To the extent that this USGS report in any way changes the mindset that has driven energy thinking in the US over the last decade as outlined above it will be very helpful. In particular.

1. regardless of the exact amount there is still plenty of oil to be found at economic prices right here is Western ND

2. That oil is way cheaper on a cost per bbl basis than the other energy alternatives being pushed by the politicians and environmentalists.

3. I've hung out in Parshall Township for a lot of my life and have yet to see a terrorist (or a Communist there). However, I do see a lot of Norwegians. With few exceptions, the people living there have always been quite friendly toward me. While there have been a few complaints about how the wells change the landscape, and some people have gotten wealthy when they were not before and a few people who thought they were on top of the local wealth ladder are now hanging on a lower rung than they were, we suddenly have roads that now allow us to go places where none existed before, and the land on top of the laterals looks as pristine as it always has. Plus there appears to be something called "economic acivity" going on in a spot where quite frankly not much of that existed before.

4. Meanwhile, if a good USGS report starts to secure the place of Western North Dakota as to a major source of oil for the rest of the US, not simply as a place where no one else outside of a few stubborn Norwegians would ever want to be, that can only be good for the state as well.

5. As I see it, a big number in this report could do a lot to change the beliefs in the myths that I listed above.

As oil prices go over $111 today, the USGS report should be good news for the Bakken oil drillers.

The share price for most of the Bakken drillers (EOG, WLL, SM, CLR, KOG, NOG, BEXP, GEOI, MDU, HES) are near or setting their record highs.

Record oil prices today and a favorable USGS report tomorrow should result in some excitement on Wall Street. (The excitement could include a selloff in the drillers as oil prices and the USGS report are already factored into the market.)

What truly amazes me is the lack of knowledge environmentalist’s display in public and our own congress backing policies that hinder oil development yet blame the oil company’s record profits. It’s sad that some people would rather have their grandchildren living in tent cities and being fed water and bleached flour so long as those poor little animals don’t have to relocate. The boom is huge up north. I have many friends that were recruited to start work up there in the oilfield. And construction companies are bidding left and right to build roads and rail yards to ship this fortune to a processing plant. It’s just too bad Al Gore is around to prohibit refinery construction and restrict exploration. How much more do we have to suffer before the US comes back down to reality and stop trying to waste money and time with ethanol subsidizing and electric cars. I am ashamed to be American with the tree huggers economically destroying the country.

I believe the estimated mean for the Bakken formation in the williston basin will be what DR.Leigh Price had as a mean estimate in his orginal, unpublished paper. This Number is a mind numbing 413 Billion barrels in place. the percentage of recovery is up to the oil people and there advancing methods.. They have been drilling the bakken for 50 years already and will drill it for another 50 years.The reason for this estimate, is his paper work was intended for submission before his untimely death..Had He summitted this work , it would have had to stand up to peer review from his scientific colleges.. There probably maybe some minor movement of numbers, but i would expect that considering the size of the basin, and the multiplyer you use on each section of land. JMHO.. don

To an extent, I'm more interested in the methodology they use than an actual figure. I don't know much about what's going on in Canada, but based on current technology, any recoverable estimate over 20B bbls is insane.

That's what I was getting at with what methodology they are using. If you don't discount what percentage of land will never be drilled, you are throwing everything off. You are not getting any recoverables from land that is not drilled.

The correct method is: what percentage of the 200k acres are going to be drilled, and of that, what percentage of the oil in place is recoverable. To say that the 200k acres have xx amount of oil and 10% of that is recoverable is silly, if that 10% is based on estimates from wells that have been drilled.

The problem would be deciding what percentage of the land would eventually be drilled. Would it be 20% of the 200K square miles? 10%? 60%? I don't think it's possible to guess that, so I'm guessing they might be better off just saying that XX billion barrels are "technically recoverable" if most or all of the land is drilled, just to give people an idea of the area's ultimate potential.

Additionally, these USGS reports always assume no improvements in drilling technology, which IMO is unrealistic. So, while they might be assuming that more acres will be drilled than actually will be, they're also assuming the ultimate recovery factors will be less than they probably will be. Those probably even out.

If you look at the map of the Sanish Field in the recent Whiting Investor presentation, you will see a plan covering the field with twin wells drilled on each 1280 acre spacing each with a lateral twice as long as EOG is using, since each lateral cuts diagonally across two sections not one, that is, two miles long. This is a substantial number of wells, the equivalent of 1 per section but with twice the lateral length ordinarily used on a 640 simple acre spacing.

This proposed map shows way more drilling than Whiting will be able to complete in 2008, and the time frame for the plan outlined here may extend 3 or four more years forward.

Having said that, there is no doubt in my mind that there will be a lot more oil coming out of this field once that drilling plan is complete versus the original plan that would use just a single well were placed on each 1280 acre spacing, as Whiting had originally intended to do.

So, what are we to assume about the development of the entire Bakken, including the areas that have not been drilled? If practically the entire Bakken gets tackled as aggressively as Whiting plans for the Sanish fiekd, and the wells keep coming in employing this approach at economic rates of production, the interest in drilling more of the Bakken over the next few years will be enormous.

Meanwhile the EOG experiment that could lead to a doubling of the number of wells in the current Parshall field by running wells between existing wells (Patten & Bartelson) has just begun, and it could turn out that the Parshall field is even more productive than anyone had imagined employing that new spacing approach.

So if we are going to estimate the ultimate production of the Bakken, it seems to me we need to make some basic assumptions about what spacing and lateral approach and technolgy will be employed in the area containing the oil, and we would likely get very different numbers depending on whether we assume that what Whiting is proposing to do in the Sanish field and what EOG is experimenting with in the Parshall field works or not. If these experiments work like the drillers Whiting and EOG hope, the implications for the outcomes of drilling in other parts of the Bakken could be massive, including the estimates of economically recoverable oil for the entire area.

No one at USGS can possibly know nor factor in the outcomes of these experiments in spacing and lateral length and positioning since the drillers themselves do not no yet.

It's hard for anyone to predict what impact new technology will have so asking someone at USGS, who only has producing well information to go off of, to predict future improvements is off the mark. Also, because the USGS methodology does not factor in economics it becomes much more of a game of how many wells could be drilled over the entire interval containing rocks in the Bakken petroleum system and then applying the known production distribution for existing wells to that spread. This gives you a distribution of producable oil for the Bakken petroleum system and from that the politicians will highlight any number they want to. One of the flies in the ointment for this is completion methodology. How should a geologist trying to produce an assessment account for the varied completion methodologies used when trying to come up with a meaningful production normalization?The bottom line as I see it, however, is that because economics are not factored into the equation any number the USGS comes out with will be much larger than the actual amount of oil that gets produced. To answer one other question, the reason the assessment might cover Canada is because the assessments are for basins and those don't always follow geopolitical lines.

The Eastern Expulsion Threshold AU(Peticular area of interest to me) as they call it contains 973 Million Barrels of Oil they say, It looks like it affects 7 Counties and I will guess around 90Townships, that would be 3240 Sections. If you do the math it would mean that 300,000 + Barrels of Oil exist per Section. (It came out total 972 Million) at 82 barrels per day, per section the well would be dry in 10 years. Does this sound right ??????

Is this what everyone has been waiting for? I assume that this little two page synopsis is just a summary of a more thorough report to follow? If this is all they have to say on the subject, its nothing but a joke!

Bakken is the hot play just north of the border. Before break up we had some 60 rigs in south east Saskatchewan. Cresecent Point Energy, Petrobank, Tristar are the big player in the Bakken and in May could have 10 drilling rigs each. Bakken Wells in Saskatchewan are typically about 4500 feet deep, I know that they are closer to the surface then in the Montana area.

Lots of yakking about POSSIBLE recoverable reserves. Where is the data about flow rates?

Our problem is crude oil consumption in the range of ~21 million barrels a day. Will the Bakken ever produce even a half million per day? Folks in the Williston Basin regions may see some prosperity from the Bakken, but it does not look like the silver bullet everybody hopes for.